As legal experts in real estate law, notaries can draw up all necessary preliminary contracts—purchase offer, offer to sell, counter-offer, promise to purchase and promise to sell—up to the signing of the act of sale.
Notaries act without bias and ensure that the will and rights of the buyer and seller are respected at all times.
Notaries have the expertise to guide and protect you throughout the process of buying or selling a property. Their advice will help you avoid many missteps, especially in the following situations.
To avoid misunderstandings
Once a purchase offer is signed and accepted, it is very difficult to change the terms or cancel it. For this reason, it is important that the terms of the purchase offer be written accurately and clearly. This will prevent any misunderstandings that could not have been anticipated by you or the seller.
Standard purchase offer forms contain some ambiguous clauses that are open to interpretation and could cause unforeseen difficulties. By signing such a form, you could be agreeing to:
- Make a non-refundable down payment
- Meet deadlines that don’t suit you
- Waive a warranty
- Buy even though you thought you could back out
To avoid being saddled with a contractor’s debts
Notaries can tell you how to protect yourself against a legal construction hypothec when purchasing property.
To save you from financial obligations
To avoid paying a penalty on your mortgage, your buyer could take over your existing mortgage at the time of purchase. However, you would still be responsible for the mortgage while the property no longer belongs to you. Notaries will inform you of consequences and other possible solutions.
Pour évaluer les modes de financement
Notaries can advise you on the various financing methods and help you evaluate any proposals you have already received. For example, is it better to agree on a balance of sale with the seller? Should the buyer take out a new mortgage instead?
To protect stakeholders’ money
A notary can only remit the proceeds of sale to the seller after having carried out certain verifications. This ensures that all parties are protected. Notaries must manage all funds entrusted to them in accordance with strict rules, and ensure, in particular, that they hold all the necessary funds before proceeding with the transfer of ownership.
Pour s’assurer de la validité du document
Under Quebec law, any real estate mortgage must be recorded in an authentic act executed by a notary. Otherwise, the mortgage is invalid. Notaries must ensure that the form of the document meets the requirements of the law and that its content faithfully reflects the intentions of both parties. Once notarized, the act of sale and the mortgage are difficult to contest.
To ensure the feasibility of a project
The purchase of a property sometimes entails an expansion project, construction of a garage, change in use, operation of a business, etc. They are not necessarily feasible since some municipal by-laws may impose restrictions. It is therefore essential to be well informed of your project’s feasibility beforehand. Notaries can carry out the verifications.
To check the conformity of a property
However, some non-conformities in a property may be grandfathered. Notaries will carry out all necessary verifications with the municipality to ensure that the condition of your property is in compliance with municipal by-laws and will inform you of possible consequences if it is not.
Many clients are unaware of the preventive role of notaries. However, their advice helps you avoid missteps that could lead to costly litigation. Notaries perform several verifications so that you can enjoy your property with complete peace of mind.
Notaries will inform you of all the authorizations required to sell a property and take the necessary steps to obtain them.
Selling without having the right to do so directly threatens the validity of the sale and may expose you to civil lawsuits. An owner must be authorized to sell, particularly in the following cases:
- If the sale concerns a family residence, the owner requires written consent from their spouse.
- A tutor may need certain authorizations to sell a minor’s property.
- In certain circumstances, the sale of designated cultural property must be pre-authorized; the same applies to the sale of agricultural land.
- The sale of an immovable that is part of a housing complex is subject to the authorization of the Tribunal administratif du logement (formerly the Régie du logement).
Couples, whether or not they are married or in a civil union, often buy property and then become co-owners through joint ownership. In this situation, it is recommended that the main rules surrounding things like the management of the property be set out in writing. Notaries can advise the spouses on the scope of the agreement and draw up the act to that effect. This act may also provide for:
- Each party’s financial contribution for the purchase of the property
- The terms surrounding mortgage payments and property-related costs (e.g. taxes, maintenance, repairs)
When two or more people buy a property together, the notary can help them determine the utility of signing a contract between them and the clauses to be included.
Careful! If you are a “de facto” (common law) spouse and your name does not appear on the act of sale, you have no rights to the property, regardless of any children you may have or of the number of years you lived together. The spouse whose name appears on the act of sale will be the sole owner. Upon that person’s death, the other spouse will not inherit the house, unless the deceased left it to them in a will.
Having a notary perform a chain of title search on a property is essential to ensure an indisputable title of ownership.
One of the main tasks of a real estate notary is to search for what is called the chain of title to a property. The links in this chain are made up of each successive sale of the property you wish to acquire. The purpose of the search is to establish that these sales fully transferred the right of ownership from the seller to the buyer.
In carrying out these verifications, the notary ensures that the seller is the true owner of the property and ensures you a clear title of ownership.
The first step in a title search is to check whether:
- The seller is the true owner of the property
- The seller has the right and capacity to sell
- The seller’s spouse or anyone else must consent to the sale
- Using the location certificate, the notary then checks whether:
- The dimensions of the lot are correct
- The buildings have been properly erected on the lot to be sold
- The house was built in accordance with municipal by-laws and applicable zoning laws
- The neighbour’s property encroaches on the lot
- The locations of the windows meet legal requirements
- There are rights of way, etc.
The notary also uses this title search to detect charges or real rights that could affect, limit or devalue your right of ownership, such as a mortgage, seizure, judgment or servitude.
It can be difficult to change the terms of or cancel a purchase offer, which is why it is important to consult a notary before signing and accepting one.
It should contain properly drafted clauses adapted to your situation to avoid misunderstandings and protect you from potential litigation.
Watch out for standard purchase offer forms, which can sometimes cause difficulties. The legal accuracy of this type of document is not guaranteed, and certain ambiguous clauses may be open to interpretation. Moreover, without prior analysis by a notary, you may be unaware of the consequences of certain clauses. By signing this type of form, you could, for example, be agreeing to:
- Make a non-refundable down payment
- Meet deadlines that may not suit you
- Waive a warranty
- Buy even though you thought you could back out
Notaries can draw up a clear offer that is not open to interpretation. Legally, the offer must protect the interests of both the buyer and the seller. Notaries must therefore take care to document all essential elements of the sale, in particular:
- Prerequisites for the sale
- An accurate description of the immovable and a list of other property included in the sale
- The respective obligations of the buyer and seller
- The sale price and method of payment
- The amount of the deposit to be kept in trust
- The conditions and warranties of the sale
- Documents to be provided
- Dates and deadlines for:
- The building inspection
- The signature of the mortgage contract
- The signature of the act of sale
- Costs assumed by each party
Consulting a notary about a real estate transaction is essential to obtaining all the necessary information to better negotiate.
Under the law, the seller is bound by legal warranty to the buyer. This warranty includes two elements:
Warranty of right of ownership
The seller must guarantee the buyer a valid title of ownership. In other words, the seller guarantees the right of ownership of the property. More specifically, this means that the seller must guarantee that the property:
- Has no title defects and that it is free of all charges (mortgage, servitude, etc.) except those declared at the time of sale
- Does not encroach on the neighbouring property and vice versa
- Does not contravene public law restrictions, such as a zoning or urban planning by-law violation, with the exception of those registered with the land registry office or those that have been declared
The notary will analyze the seller’s declarations and make various verifications, including the location certificate and title of ownership. The notary can also, upon request, verify the property’s compliance with municipal by-laws.
Warranty of quality
The seller is also bound by the warranty of quality, i.e. the warranty against latent (hidden) defects. This covers only major defects that existed at the time of the sale that were unknown to the buyer and that even a prudent and careful buyer could not have discovered.
A defect is a flaw significant enough to render the property unusable for the purpose for which it was purchased. The defect so diminishes the value of the property that, if the buyer had been aware of it, they would not have purchased the property or would have negotiated a lower price.
Notaries can draft a clause that extends or limits liability to reflect the wishes of the parties while complying with the law.
To the extent permitted by law, the parties can agree to expand or reduce the scope of a legal warranty. It is therefore possible to sell without legal warranty if a clause in the contract provides for it. The clause must be properly drafted to avoid any ambiguity. However, sellers can never avoid their personal liability.
Professional vendors can never be relieved of their liability for defects that they were aware of or could not be unaware of and did not reveal. Careful! This means that if a sale is made without warranty, and the seller is not a real estate sales professional, the transaction is entirely at the buyer’s risk.
Keep in mind that buying a property without a legal warranty means that you are buying the property in the state it is in, without any possibility of recourse against the seller in the case of latent defects. If you still want to complete the transaction, make sure you have the building inspected by a qualified professional and negotiate the price to compensate for your lack of recourse.
Your notary will ensure that the promise to purchase or sell that you are being offered contains clauses adapted to your situation allowing you to withdraw under certain circumstances.
Contrary to popular belief, an offer to purchase is indeed a contract. It can be very difficult to change its terms or cancel it. It is therefore essential to ensure that the promise to purchase you are offered contains clauses adapted to your situation. Notaries ensure that the clauses are drafted precisely and clearly to avoid any misunderstandings that neither you nor the seller could have anticipated.
Purchasing new property and the right of withdrawal
- If you buy a new property from a developer or builder and plan to live there, the preliminary contract must ensure that the promisor-buyer (prospective purchaser) can withdraw the promise within 10 days. The developer or builder can demand compensation but cannot force you to give up this right. This compensation cannot exceed 0.5% of the selling price.
- If you buy a new condominium from a developer or builder, the preliminary contract must be supplemented with a memorandum*. In addition to providing that the promisor-buyer has 10 days to withdraw from the promise, the contract must provide that the promisor-buyer may withdraw from the contract within 10 days of receiving the memorandum or if the seller does not provide a memorandum upon signing the contract.
* For more information on memorandums, visit Lacopropriété.info
La convention d’arrhes
The preliminary contract can contain another type of clause minimizing the impact of a withdrawal: the deposit agreement. This clause allows a party to withdraw from a promise to sell upon payment to the other party of a certain amount for prejudice that this situation may cause. The preliminary contract often provides for a time limit to take advantage of the deposit agreement, after which the promise becomes irrevocable and the sum paid is then considered a deposit on the sale price.
The wording of the deposit agreement must be very clear because any doubt will lead a payment of funds to simply be considered a down payment on the sale price.
Demand letter and action for the transfer of title
A bilateral promise binds both parties. The refusal of the buyer or seller to comply by signing the act of sale may result in a legal process called an action for the transfer of title (also known as an action in passing of title or an action in execution of title). The outcome of the preliminary step, the demand letter, will dictate what ensues. This letter enjoins the defaulting party to comply by signing the act of sale under the conditions stipulated in the preliminary contract and within a given period. The other party is entitled to initiate an action only if the defaulting party fails to comply with this demand letter.
The court will verify that the application is admissible. If the judge accepts the action for the transfer of title, the judgment will serve in lieu of the act of sale, with all related effects, without an act of sale having to be signed before the notary.
The action for the transfer of title may also be accompanied by an application for damages, seeking compensation for losses suffered by the plaintiff as a result of the delay in obtaining the title to the property, for example.